A government decree changed the rules of crowdfunding in Colombia to allow investments in medium and small companies in the agricultural, industrial, commercial or service sectors and even in closed collective investment funds. Reference image.
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By far the most famous method crowdfunding (also known as crowdfunding) donated money over the Internet to promote startups or business ideas that needed a push to come to life: video games, book or comic publishers, sustainable fashion offerings, and even online channels. YouTube has a place in the museum of projects funded through crowdfunding.
In the world of crowdfunding platforms like Kickstarter or Buy Me a Coffee, they have earned a place by connecting those entrepreneurs who lack capital with a kind of “anonymous patrons” who want to contribute to innovation and entrepreneurship. In Colombia, Vaki is one of the most popular platforms.
Recently, a government regulation changed the rules of crowdfunding in Colombia to allow investment in medium and small companies agricultural, industrial, commercial or service sector and even in closed collective investment funds.
After all, what Decree 2105 of 2023 The Regulatory and Financial Regulation Outlook (URF), an organization under the Ministry of Finance, is designed to promote the digital economy where permitted. “non-traditional forms of financing” (e.g. crowdfunding) to advance production chains or strengthen the workforce of SMEs. Lack of resources is what stops these companies in the vast majority of cases.
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How will crowdfunding change?
From now on, companies in the agricultural, industrial, commercial or service sectors, as well as autonomous assets, closed-end collective investment funds and private equity funds, among others, will be able to access crowdfunding. This is an important financial milestone for the market, which, despite its growth in recent years, still remained with many limitations.
In the same way, it will allow companies that are not registered in Colombia, but want to implement a productive project in the national territory and intend to finance it through crowdfunding, to do so without much problem. Before the new decree, startups, for example, were not allowed to engage in crowdfunding, as their headquarters are usually located in other countries.
Of course, the decree establishes that they will be able to receive only collective financing companies located in the country, as well as recipients (managers of these SMEs) and depositors. “Recipients must be residents of Colombia, unless the object of the productive investment project for which they are requesting financing is entirely developed in the territory of Colombia. Above, without prejudice to the application of tax legislation,” the decree reads.
Likewise, debt acquired by companies in crowdfunding models must be reported to risk centers that will generate more transparent and secure information about how they will use their taxpayers’ money.
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What impact will this ruling have?
Mary Avila, CEO of Inversiones Bloom, explains that these new rules of the co-financing game in Colombia will have a direct impact on the financial sector and the capital market: “First, they will consolidate the regulatory framework that will promote the growth of different financing mechanisms and economic growth; secondly, they will promote financial integration and alternative financing mechanisms; and third, they will reinforce the high standards of transparency, integrity and fair treatment of consumers that underpin the nation’s crowdfunding model today.”
“Similarly, it will improve the entry of foreign companies into Colombia, taking advantage of the benefits and opportunities of joint financing, attracting new investors and growth opportunities for all,” Avila emphasized.
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Finally, the URF decree also regulates the use of correspondent models that allow crowdfunding to cover more territories by allowing crowdfunding companies to receive money “for or as a result of carrying out authorized operations”. to invest in productive projects and their returns’, as well as issuing and delivering statements or consulting balances.
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